(IRS)method of calculation is the actual difference
Indeed: the actual difference when the option is exercised. As I understand it, the IRS taxes have to do with the exercise of the option, not the existence of the option in advance of exercise. Company records an expense, exercisor records a gain. (IRS, AFAIK, doesn't permit it the other way for out of money options.) But AFAIK, IRS does not permit reducing taxes on grant. Is that your view also?
I take it that the IRS does not, then, consider the 123 option expenses to be tax reducing expenses. And then the question is: why not since it's a real expense?
An accountant strives to record an expense when it is incurred; ( As in depreciation? lease obligations? ) in this case, the expense should be recorded when the option is awarded to the employee, not when the option is exercised
And when the option is exercised, will the company record a tax reducing expense as now? I hope they record whatever is necessary to avoid sending money to IRS, even if it doesn't make accounting sense.
If a company has relatively constant option award practices, those two numbers should balance out to be the same over time
But it's the stock price behaviour that determines these numbers, not the practices of the company. I'm sure you have done back calculations and know these numbers can be very volatile no matter how constant the award practices. Quarter to quarter there probably will not be much change because of the long base ( how long is that base? How many valuation methods are permitted? Can one change valuation methods at any time? ) used for the prediction, but that long base also makes the entire predictive process yield inaccurate results. Will they 'average out' in the very long term? Not in a down market.
Know of any on-line specific sources for such back calculations? |
